Saudi Arabia, Russia, Qatar, and Venezuela have agreed to freeze oil production at the level of supply produced in January, dashing oil bulls' hopes of a cut that would have increased prices.

The freeze is a tiny victory for Russia in its oil war with the Saudis; the plunge in the price of oil over the past year has been ruinous for the Russian economy.

The Russians need oil-producing countries to cut production to drive up prices. But the Saudis have resisted cuts, partly because they can produce oil cheaply (and thus feel less pain when the price goes down), and partly because they believe that cutting production will let other countries — such as the US and Russia — steal market share from them in places like China.

Before the agreement, which came out of a secret meeting Tuesday morning, oil prices rose overnight as observers hoped the Russians had secured a deal to cut production:

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But when the news came out that the two sides had agreed on a freeze and not a cut, prices collapsed once more:

Investing It doesn't take too much to move the price of oil these days. The commodity was up over 5% on a report in the Financial Times that the Saudi oil chief, Ali al-Naimi, met with his counterparts from Russia, Qatar, and Venezuela. It fell back down to a rise of just over 2% by 9:20 a.m. UK time.

Twitter was ablaze with oil talk after the countries met in secret Tuesday morning.

An oil freeze won't end the supply glut that has forced prices from over $100 a barrel in 2014 to about $30 this year.

The FT's Anjli Raval and David Sheppard didn't give the agenda of the meeting, but markets took it as a sign a production cut might be being discussed behind closed doors. There have been increasing calls from members of OPEC, the oil-producing cartel, to cut production and raise prices from countries such as Nigeria and Venezuela.

The meeting exposed the divisions within OPEC.

Saudi Arabia, perhaps the most powerful OPEC member, wants to continue with a strategy of oversupply to drive down prices. Saudi Arabia won't be easy to sway on any cuts; its aim is to undercut the profitability of the US shale oil industry.

A production cut and higher prices, however, would benefit other members, such as Venezuela and Russia, that have higher oil-production costs. Tuesday's meeting came a day after the first Iranian oil exports hit Europe, which will put further downward pressure on prices.

But, as Business Insider's Elena Holodny reported last month, ties between Russia and Saudi Arabia have been strengthening since the US lifted restrictions on Iran, which could smooth the way toward a production cut.

Chief among them:

Russia's president, Vladimir Putin, recently held a series of bilateral meetings with the de facto leader of Saudi Arabia, the Deputy Crown Prince Mohammad bin Salman, regarding security and economic issues.

Putin and Salman signed a $10 billion economic agreement last year.

The Saudis expressed interest in buying Russian weapons.

And even though the Saudis and the Russians are on opposite sides of the Syrian conflict, there were some reports that Putin might be open to Syrian President Bashar Assad's stepping down. (Some experts are skeptical that this is true.)

As Holodny reports, RBC Capital Markets' global head of commodity strategy, Helima Croft, said, "Hence, we believe that there is an existing dialogue channel that could be used to coordinate joint action."